AT&T Sales Reps Gave Wrong Info on Termination Fees in Test

Published on: 3rd Feb 2008

Note -- this news article is more than a year old.

WASHINGTON (Dow Jones) The Consumers Union said that AT&T Wireless sales representatives provided false information about the company's policy toward early termination fees during a mystery shopping exercise carried out by the public interest group last week.

In several phone calls made by an employee of the Consumers Union, some
salesmen at AT&T Wireless said the company had implemented a policy pro
rating the fees and provided details of that policy.

One salesman said the company's policy was that after the first year of a
standard two-year service contract with AT&T Wireless, the early termination
fee is cut in half.

Another said that the fees gradually reduced over the term of the contract.

But in reality, while the company announced last year that it was planning on
changing its early termination fees, but has yet to announce any details of what
its new policy is.

According to Mark Siegel, an AT&T Wireless spokesman, the company
continues to charge $175 to any customer who wants to break his service contract
with the company.

Siegel wouldn't say when the company would announce details of changes to
this policy, nor when the changes would be implemented by AT&T.

Siegel apologized for the false information provided by the company's
salespeople.

The Consumers Union admitted the mystery shopping exercise was a small
sample, but said its findings were disconcerting.

"When we see carriers making policy announcements and then misleading
consumers that they would get something they in fact, won't, it is
disappointing," said Chris Murray, senior counsel at the Consumers Union.
"They're actually capturing market share with consumers believing they may
get a pro rate when they won't."

The group made 12 calls to AT&T salespeople. Two-thirds of the
representatives provided inaccurate information about the company's policy
toward early termination fees.

AT&T Wireless is a unit of AT&T.

Consumers Union also called the other three largest cellular companies:
Sprint Nextel Corp. (S); T-Mobile, owned by Deutsche Telekom AG (DT); and
Verizon Wireless.

Representatives of each of those companies provided the correct information
about their early termination fee policy to the mystery shopper.

Verizon Wireless altered its early termination fees policy in November 2006.
Its fees reduce $5 for every month of a customers' contract.

Like AT&T, Sprint Nextel has announced it will move toward a pro rated
model in 2008, but similarly hasn't released any details of what its new policy
would look like.

A spokesman for T-Mobile didn't return phone calls seeking comment for this
article.

The issue of early termination fees has garnered the spotlight in Washington
in recent months.

Sen. Amy Klobuchar, D-Minn., introduced legislation in October that would
require wireless companies to pro rate their early termination fees.

The Senate Commerce Committee held a hearing into the wireless industry in
October at which lawmakers criticized executives from wireless companies over
"anti-consumer" policies like early termination fees.

AT&T had made public its commitment to begin pro rating its early
termination fees the day before that hearing in October.

"AT&T announced the day before our hearing that they were going to
pro rate their early termination fees - it turns out they haven't," said
Klobuchar, in a statement Monday. "This illustrates the need for federal
legislation to protect cellphone users from budget busting fees and to create
more consumer friendly policies."

Wireless companies have argued there must be some way to lock in customers as
they heavily subsidize the cost of handset devices.

Rep. Edward Markey, D-Mass., the chairman of the House Telecommunications
Subcommittee, is currently drafting a version of a wireless bill. A spokeswoman
said this would also deal with the early termination fee issue. Markey's bill is
expected to be released in the next two weeks.

Federal Communications Commission Chairman Kevin Martin said in September
that the agency would look into the fees charged by all the companies the
commission regulates. But the commission hasn't announced any subsequent plans
to carry out an investigation into the issue.

A spokesman for the FCC declined to comment about the Consumers Union
findings, saying the agency hadn't seen the report of the mystery shopping
exercise.

The agency has the ability to investigate complaints of this nature, but the
spokesman declined to comment whether it would begin an investigation into the
allegations.